Growth slower in US and India: Growth was stronger than expected in APIs—active pharmaceutical ingredients--(up 63% vs our est. of 37%), Europe (up 30% vs our est. of 8%) and semi-regulated markets (up 55% vs our est. of 14%). Growth for the US and India slowed down during the quarter due to erosion in base business and base effect, respectively.

Guidance for FY15: GNP has guided 16-18% revenue growth for FY15, with Ebitda at R15 bn-15.2 bn. Growth would be strong in emerging markets and Europe (on a low base), and recover to above 18% in India. US business is likely to grow 12-15%, given the lack of clarity on new approvals. R&D expenses would be 9.5-10% and tax rate is likely to be 22%. Capex guidance stands at R4.5 bn-5 bn. The management expects a reduction in net debt.

Raising EPS estimates; maintain Buy: FY15 is shaping up to be a slow year for GNP mainly due to mid-teens growth expectation in the US. Growth drivers in India and key semi-regulated markets remain strong. Higher R&D spends are likely to result in muted margin expansion. We do not expect any major reduction in debt during FY15. However, we expect FY16 to be a stronger year for the US. We maintain Buy with a revised target price of R665.

Takeaways from conference call

Guidance for FY15e: The management has guided for 16-18% revenue growth, with Ebitda expected in the range of R15-15.25 bn. R&D expenses are guided to be in the range of 9.5-10% while tax rate is expected to be 22%.

US business is expected to grow in the range of 12-15% on a constant currency basis. The management expects 3-4/10-12 product launches in Q2/FY15 which will lead to a recovery in growth. Key future launches include gFinacea (FY16) and gZetia (FY17e). GNP is also developing products in niche areas like complex injectables,